Arizona Federal is no longer accepting applications for Paycheck Protection Program (PPP) loans; however, we’re proud to announce that over the last several weeks we’ve assisted hundreds of small businesses in Arizona by funding 508 loans totaling more than $46 million.
Loan Forgiveness Process
We're awaiting final guidance from the Small Business Administration (SBA) before we begin accepting applications.
New Online Resources & Tutorials
In helping you prepare for loan forgiveness, we have developed additional resources and videos to assist you in navigating the forgiveness process. We hope our PPP borrowers find these resources beneficial. Please contact us if you have any questions or feedback.
Online Application Coming Soon
We expect to introduce the online Loan Forgiveness Application in August. Please be sure you have provided us with your current email address so we can notify you.
Please monitor your email for instructions on the forgiveness process and check back here for additional updates.
Loan Details and Forgiveness Guidelines
PPP loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities (at least 60% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of five years and an interest rate of 1.00% APR.
Arizona Federal’s Loan Forgiveness Process and Timeline
Borrowers must apply for loan forgiveness – it is not automatic. As the borrower, it is critical to understand the SBA rules and guidelines.
Although Arizona Federal has not begun accepting loan forgiveness documentation at this time, the SBA has released its revised Loan Forgiveness Applications (Form 3508 and Form 3508EZ). We recommend that all borrowers begin reviewing the application and assembling the required documentation for loan forgiveness.
Since Arizona Federal will be setting up an online process for submitting loan forgiveness documentation, we do not recommend completing a paper application, unless that would assist you in compiling your documents.
In the meantime, we see the general process occurring as follows:
|Up through day of funding||Determine how the funds will be used, familiarize yourself with the forgiveness guidelines (see SBA website for additional information)|
|Weeks 1-8 after funding||Use the funds appropriately at your determination, track use of funds carefully (separately) to ensure you’re prepared for the future forgiveness request|
|TBD||Arizona Federal will provide additional information via email about how to best prepare for the upcoming forgiveness request|
|to be an online process|
|TBD||Once your documents have been successfully collected, Arizona Federal will submit your forgiveness request to the SBA|
|TBD||The SBA will notify Arizona Federal that forgiveness has been granted, and reimburse Arizona Federal for the amount forgiven (or request additional information that we may need to collect from you)|
|TBD||Arizona Federal will notify you of completion of the forgiveness process, and provide terms and payment details for any residual balance remaining|
Please ensure that you have provided us with your current email address, and please monitor that inbox closely from this point forward to ensure you receive timely updates about your PPP loan.
Preparing for Loan Forgiveness
The fact that your PPP loan may be forgiven is obviously one of the most attractive features of the program. But even if your loan is not completely forgiven, it still features very attractive repayment terms: five-year term repayment, 1% APR and a six-month deferment period.
With that said, it will be important for all borrowers to take the appropriate actions and maintain proper documentation to qualify for the maximum forgiveness amount.
Use the funds appropriately
To be eligible for PPP loan forgiveness, the funds must be used for very specific needs. If this money is used for items outside this list, forgiveness is forfeited:
- Payroll – This includes salary, hourly wages, vacation time, 401(k) contributions, family medical/sick leave, other health benefits. A minimum of 60% of the loan must be used toward payroll and cannot include independent contractors.
- Mortgage/Rent/Utilities – If your covered lease, mortgage, and utility service were active before February 15, 2020, up to 40% of your total loan proceeds may be used for rent, utilities and mortgage interest
These expenses are covered for an 8-week or 24-week period, beginning on the date you received the loan funds. Loans funded prior to June 5, 2020, are eligible for the 8-week or 24-week covered period. All other loans default to the 24-week coverage period.
Maintain staffing requirements
The goal of the Payroll Protection Program is to keep employees on your payroll. Therefore, to qualify for loan forgiveness, it is important to meet the program requirements:
- Maintain your employee headcount. This will be calculated by comparing your average number of full-time equivalent employees before February 15, 20201, with the average number of employees on your payroll during the 8-week or 24-week period following receipt of your loan.
- Maintain at least 75% of the total salary/wage during the 8-week or 24-week period for each individual employee who made less than $100,000 in annualized pay in 2019.
- Rehire any employees who were laid-off or furloughed; you have until December 31, 2020, to do this. You must also pay any difference in pay greater than 25% by this same date to qualify for loan forgiveness.
If you do not meet one or more these requirements, your loan forgiveness amount will be reduced.
Depending on your payroll coverage, it may be in your best interests to adjust the payroll cycle to accommodate as many pay periods as possible. For example, you may benefit from temporarily adjusting your payroll cycle from semi-monthly or bi-weekly to weekly.
1 Use one of the following time frames to establish your employee count prior to February 15, 2020: February 15, 2019 through June 30, 2019, or January 1, 2020, through February 29, 2020.
Carefully document how loan proceeds have been used
It may be beneficial to open a separate account to manage and track how the funds are being used. Contact us if you would like to open an account to track your PPP loan proceeds.
You may be required to submit the following documentation to apply for loan forgiveness:
- Verification of all full-time employees on your payroll and their associated pay rates for the time period
- Payroll reports from your payroll provider
- Copies of filed payroll tax forms (Form 941)
- Copies of income, payroll and unemployment forms filed with your state
- Verification of retirement and health insurance contributions
- Verification of eligible interest, utilities and rent payments
The AICPA offers a free online resource that you may find useful for calculating your loan forgiveness amount. Please contact your CPA if you have questions.
Stay informed about current rules
It’s important to familiarize yourself with the latest loan forgiveness rules, regulations and guidance under the PPP. This information may be updated frequently. We encourage you to visit the following websites for the most current information:
Loan forgiveness may be very complex for your business. If you face complicated loan forgiveness questions, we strongly advise you to seek guidance from your CPA or attorney.
Frequently Asked Questions for Borrowers
If your PPP loan was made before June 5, 2020, you may elect to use an 8-week or 24-week covered period, known as your “Loan Forgiveness Covered Period.”
If you submit to your lender a Loan Forgiveness Application within 10 months after the end of your loan forgiveness covered period, you will not have to make any payments of principal or interest on your loan before the date on which SBA remits payment to us for the entire loan forgiveness amount on your loan (or notifies of us of partial or no loan forgiveness).
If you do not submit a loan forgiveness application within 10 months after the end of your loan forgiveness covered period, you must begin paying principal and interest after that period.
While we’re happy to explain the PPP guidance (as provided by the SBA), you should also consider seeking assistance from a CPA or other professional to help you determine how to use a PPP loan as part of the overall financing strategy for your business.
Keeping a clean paper trail of the receipt and use of PPP funds will help you to prepare for the loan forgiveness process. Maintaining a separate account for those funds is one of the simplest ways to keep track of the expenses. If you’d like to open an additional account to keep your funds separate, please contact your personal banker.
In most cases applications can be submitted after your 8-week or 24-week covered period ends.
Borrowers will receive an email with a personalized link to complete there Loan Forgiveness Application online. Once you receive this link, you can begin the application process.
Our online application provides tips, information and guidance along the way, making it very user-friendly. In addition, our team can provide general guidance on how to complete the application and the documentation you will be required to submit.
The SBA is offering help with forgiveness applications through many of their SBA district offices, Small Business Development Centers and SCORE Business Mentor programs. Visit the SBA website to find local assistance.
We are unable to provide guidance related legal matters or tax implications. Please consult your CPA or tax advisor for assistance with those questions.
The information and resources on this website are provided as a courtesy. They are not written or warranted by Arizona Federal Credit Union.
Any information provided by sources other than the SBA may be helpful, but please keep in mind that the SBA will make the final determination on all matters related to the PPP, including the amount granted for loan forgiveness.